Europe’s Carbon Trade War

Date: 08/02/12

Beijing tells Brussels what it can do with its airline emissions tax.

Does the world need a new trade war? Probably not, though our friends in Brussels seem to think so: Over intense international protest, they’ve plowed ahead with a new tax that requires airlines to purchase carbon emissions permits for the entirety of any flight that lands in or takes off from Europe. That goes even if only a fraction of, say, a Chicago to Frankfurt flight cuts over European airspace.

So here we go. On Monday, Beijing forbade its carriers from complying with this frequent-flyer-in-reverse scheme. Brussels immediately responded by insisting that noncomplying airlines will face large fines, and even bans on operating in Europe. The next day a Chinese Foreign Ministry spokesman told reporters that unless the EU backs down, “China will consider taking necessary steps in accordance with the way things develop to protect the rights of our nationals and our companies.”

The Chinese are right to object to this resurgence of Euro-imperialism. And they’re not alone. In a joint statement in September, 26 governments declared the EU scheme illegal, citing the 1944 Chicago convention on aviation that gives each signatory “complete and exclusive sovereignty over airspace above its territory.”

The U.S. Departments of State and Transportation are also mulling “appropriate action.” American, Chinese, Russian, Indian and other national delegates are expected to meet later this month in Moscow to discuss the threats that have already been floated: retaliatory taxes, cutting off Airbus orders, overflight fees against European airlines.

The charges for Europe’s carbon permit scheme won’t come due until next year, so there’s still time for Brussels to see reason. Alternatively, Europe can help spark a global trade war nobody can afford over a tax nobody needs in furtherance of an anticarbon nirvana that never will come to pass.